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WTO Appellate Body Rules Against Argentine Import Requirements

20 January 2015

Mayer Brown Legal Update

On January 15, 2015, the Appellate Body of the World Trade Organization (WTO) issued its opinion in three disputes—brought by the United States, the European Union and Japan—challenging Argentina’s import requirements.1 The complainants argued that, in violation of the WTO agreements, Argentina imposed the following trade-related requirements (TRRs) as a condition to import goods: (i) to export a certain value of goods from Argentina related to the value of imports; (ii) to limit the volume of imports and/or reduce their price; (iii) to refrain from repatriating funds from Argentina to another country; (iv) to make or increase investments in Argentina (including in production facilities); and/or (v) to incorporate local content into domestically produced goods. Additionally, the complainants argued that Argentina’s requirement of an Advance Sworn Import Declaration (Declaración Jurada Anticipada de Importación, or DJAI) for any imports for consumption in Argentina conflicts with its WTO obligations.2

The original panel in these disputes found that the TRRs constituted a single measure restricting the importation of goods and were inconsistent with Article XI:1 of the General Agreement on Tariffs and Trade (GATT 1994). Additionally, the panel concluded that the TRRs, with respect to the local content requirements, modified the conditions of competition in the Argentine market such that imported products were granted less favorable treatment than like domestic products. Thus, the panel held that the TRRs were inconsistent with Article III:4 of the GATT 1994. With respect to the DJAI requirement, the panel held that it constituted a restriction on the importation of goods in violation of Article XI:1 of the GATT 1994. Finally, with respect to Japan’s complaint, the panel held that the TRRs were a measure of general and prospective applicability and, therefore, violated the above articles of the GATT 1994 “as such.”

On September 26, 2014, Argentina notified the WTO Dispute Settlement Body (DSB) of its intent to appeal the panel’s reports in all three disputes.

On appeal, Argentina argued that the panel erred in its consideration of the TRRs as a single “overarching measure,” claiming that such treatment improperly expanded the scope of the disputes in violation of the Understanding Governing the Rules of the Settlement of Disputes (DSU). The Appellate Body rejected this argument, noting that characterizing the TRRs as a single measure did not expand the scope or change the essence of the dispute.

Argentina also argued that the panel acted inconsistently with its duty, under Article 11 of the DSU, to conduct an objective assessment of the matter when assessing Japan’s “as such” claims because of the panel’s failure to conduct the proper analysis with regard to the substance of the TRRs. The Appellate Body rejected this argument because it found no error in the panel’s treatment of the TRRs as a single measure attributable to Argentina.

With regard to the DJAI, Argentina requested the Appellate Body modify or reverse the panel’s findings with regard to Article VIII of the GATT 1994. Argentina argued that the DJAI is an “import formality or requirement” under Article VIII, which cannot also be evaluated as a prohibited “quantitative restriction” under Article XI:1 of the GATT 1994. However, the Appellate Body agreed with the panel’s reasoning that the obligations contained in Articles VII and XI:1 apply harmoniously and cumulatively, rather than on a mutually exclusive basis. The Appellate Body therefore upheld the panel’s conclusions with respect to the DJAI.

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